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FairTax Concerns

There seems to be quite a few little plans on how to reform government floating around. So, I thought I would take a moment to comment on one of them.

I finished reading the FairTax book that was published in 2005. If you are interested more in the book, there is a link to the book in my books section.

There were a few points of thought I wanted to put out there for the record. There is a discussion group here in Richmond who are going to pick it up and discuss it next month. I thought I would make my thoughts available since I will not be present.

Generally, I love the idea of revolutionizing government. I want refreshing new ideas in government. Solving our problems with the same thinking seems asinine to me. Something is wrong, and new ideas are going to be required to correct them. I am quite happy to throw the whole tax code out the window and go for all new. However, the problem of moving the establishment to the new house is that I am afraid the same people might be running the household. So what difference does it make if we have a new heating and air conditioning system if the fools don’t know how to manipulate the thermostat to keep things comfortable?

The FairTax generally seems like a great idea. I like the idea of making the tax code simple and straight forward. Who could possibly be against that?

One of the points they bring out is the fact that the tax code is so completely mind boggling. After all, it does take teams of experts to figure out exactly what it says and even then the IRS is not completely sure how it all comes out in the end. It seems like every little political, special interest, lobbyist wants to come along and tweak it in a certain way. That is the nature of the game of our government. I am not going to get into the aspects of how we have brought this upon ourselves; just the fact is everyone wants to tweak the system to favor them or their buddy. It is a tremendous drag on resources and time in our economy and anything to remove half this burden is probably worth it.

My first problem with the FairTax is why in the world would we think this is going to change? There is nothing in the FairTax that seems to indicate it will require citizen approval or even cognition of what is going on. In fact, it seems the majority of citizens of this country really don’t care about the tax code or anything politically. Running for President is really a popularity game where you say anything to make people your friend. Say the nicest, most far reaching, and promise the most in bonuses and you can have the job. Depending on the mood current, we find ourselves with different parties or sway. If we fear our security, we tend to think Republican; if we feel charitable, we tend to go Democrat. Despite what they say, nobody seems to care much about accountability or proper stewardship.

The fact remains, even with a completely new tax system, if it made it through intact like Linder and Boortz suggest, the lobbyists will still remain. Yes, they will certainly have to recoup and plan a new attack but I am convinced they will be working much harder at working this system than the citizens will be in protecting it. It just seems like it would be another 10-15-20 years before we end up pretty much where we started. If we could get it passed taxing the health care industry, it seems they would find the buttons to press to get themselves some exceptions, exemptions, or exclusions. Perhaps they could even keep the bill from touching them at all. They are a pretty strong lobbying group. But they will keep knocking on representative’s doors until the little tweaks over time amount to big breaks.

To me it seems we should work out the representation of the people and fix the problems leading to this problem first before we trying reforming the system already broke. The infamous “Iron Triangles” will continue until they wear down any bulwarks this system might have. Honestly, I don’t see much in the way of protection to keep the system from being changed back to favoring those who pay for insider links and favors.

Take a look at all the states that have consumption taxes. Most states have different rates for food, medical, or other areas. There is the sin tax, and many other consumption taxes which all have different rates. We have these debates taking place right now. Utah just worked out lowering the consumption taxes for food. Idaho is thinking about it. Why would a federal sales tax be any less inclined to face all these pressures?

My second problem lies in the fact of the prebate. If Social Security, Medicare, and Medicaid don’t already smack of intrusion into the market and private realms, let’s start sending a prebate check to every single consumer household in the United States. Last time I checked, there don’t appear to be any households without consumers. We are going to wipe out the IRS, but what about the bureaucracy that will have to replace it to keep track of where a family sits in relation to the poverty line and cut them a check every month for prebate against a consumption tax. We think the government has sway over us due to our taxes, just wait until they are in a sense returning our money to us for basic essentials. Even better, those illegal aliens, those drug meisters, and others who pay their consumption taxes would be mapped if they wanted their prebates. What about the homeless without a bank account or mail address, would it go through the local benefits office continuing to give them money to spend on whatever they spend it on (which is stereotyped as alcohol and cigarettes). Shoot, lets just return the cash to them on a debit card (only for those with mailing addresses) they can only spend on groceries which are healthy, don’t pollute the environment, are not genetically modified, and can sing opera to boot! Oh, we certainly cannot forget to let them pay their heating and air conditioning, but only if they have the new thermostat the State of California can manipulate by remote control. Linder and Boortz want to minimize government intrusion then introduce this which seems to be 3 times the devil the IRS ever was, despite the current abuses. I am pretty sure the lobbyists will find their perks.

What if they cannot find somebody? I am sure the government is not going to set aside in some trust fund their money until the missing people can be found. I very much doubt they will pay them their back prebates when they are found. Doesn’t this seem a bit like the Big Brother scenario the communists scared us about for so long?

Thirdly, another issue brought up in the book is the fact our government, politicians, and lobbyists found ways to sneak the money away from us. Rather than sitting down and writing a check once a year where we know exactly what we are spending and demanding accountability because it hurts, we have implemented withdrawal. Now, we pay a portion of our paycheck without ever having received the money to begin with. Most of us are just excited when we get back a grand or two when in fact we paid many thousands more. If I wrote out a check for the $6,000 I aid in taxes this year to the federal government I would dang sure want to know what they were doing with that painful check. Now, most of us are just myopic enough to be excited to get $1,500 back. Boy, talk about hoodwinked.

Boortz is definitely going to fix it isn’t he? Let’s make a consumption tax where every single person pays every single time they make a purchase. That $5 I spent on lunch now is also paying federal taxes. So at the end of the year, there is absolutely no way for me to account how much I paid in taxes for the year. Sounds like a great idea to me. At least now, I can find out how much I pay in the end, even though I might be excited to get a portion of it back. They make fun of and mock the VAT in the book because of how well the tax is hidden and then propose an inclusive tax? I could swallow this to a degree if it was an exclusive tax, meaning you saw the price of the good and then the tax was added on. If I was a diligent individual, I could know at year end how much I paid in taxes. However, if it is inclusive, there is absolutely no way I would know. That sounds heretical in a society that professes glasnost (openness and transparency), although we can debate how much we actually have. I really don’t mean to keep waving the Communist/Socialist flag it just keeps eking out. You cannot tell me the sin tax would not be re-instituted.

Lastly, this is a point which doesn’t hold as much weight, but certainly seems to be of concern to me. I don’t understand all the aspects really, but this still seems to linger. This consumption tax would supposedly be only on new products or on services. I will pay taxes on the lawyer, the doctor, the hamburger, and the new home. Taxes will be paid on food, daycare, gasoline, cigarettes, and prescription drugs. However, used items will not be taxed. If I purchase a home built 50 years ago, I will pay for the supplies to renovate it, and the services, if employed, to renovate it. This sounds great. What happens when we get to a point, perhaps like some of these European countries where new growth is slower. What happens when we confined the growth of cities and require redevelopment? No taxes would be purchased on the buying of these homes, but on their renovation or decoration. At that point, the housing market which seems such a boom to the economy and especially government coffers would slow considerably. However, the need for revenue’s will drop. When people figure out to purchase that new car and really save thousands. Doesn’t this seem that at some point in the future, this would not be a valid source of income since it will be the big ticket items that will be the money maker? This might be 25, 50, 100, 200 years in the future. But if we are trying to look for long term solutions, this doesn’t really seem like one to me. Like I said, I know this is the weakest point simply because there is so little I know about where most of our current revenues come and projected growth. I would have to really get into some numbers of Europe and see.

There are my issues and problems with the FairTax. I am more than happy to have someone explain how they would get around these. In the end, it seems the problems with our tax system are really only a symptom of some problems with our current government structure. It appears our system is missing some transparency already, the contact with constituents only becomes more distant, and that our desire to force others to live in a certain way is emblematic of deeper problems in government. Yes, taxes, especially income taxes are intrusive and obnoxious, but it is only the fruit of a tree much larger and in need of pruning. After all, why else would I be a Ron Paul supporter?